Impossible Finance Research Report #16 —Pine Protocol

12 min readNov 23, 2022

Context

The rise in popularity of NFTs has been nothing short of spectacular, with a variety of mainstream brands even getting in on the fun and token-based protocols, implementing NFTs as a main component of their ecosystems. From GameFi NFTs in the form of play-to-earn digital assets, to DeFi NFTs used to represent financial positions, such as that of Solv Finance, the utility of these assets are astonishingly creative. This increase in NFT utilization has triggered an arguable ‘worldwide adoption,’ which is further evidenced by NFT marketplace volume.

To put this into perspective, total secondary NFT sales volume increased to a whopping $70.6 billion, with the number of monthly traders following suit. For example, at the start of 2021 the total number of monthly traders was about 10,400 worldwide. Fast-forward 12 months later, the peak of the NFT bull run helped onboard over 550,000 monthly traders. That being said, even with the current market downturn there still is a significantly larger proportion of monthly traders in comparison to the start of 2021 — which roughly 360,000 traders last month alone. Pretty strong confirmation that NFTs aren’t going anywhere!

To accommodate the increase in demand for NFTs, a number of protocols have arisen to provide an array of product solutions for growing utility functions. Marketplaces are the first that come to mind, ala OpenSea, LooksRare and many more. NFT Aggregators and Sweepers have come in the form of Gem and Genie, while NFT Data Analytic are provided by Nansen, UniWhale, and Icytools, for example.

There is still a significant gap within the NFT sector in the form of financing and leverage, popularly coined as NFTfi. This is an especially important sector as protocols are still emerging with no clear front-runner. From a base level, the importance of liquidity in other aspects of crypto such as DeFi cannot be overstated, with the ability to attract liquidity often being a key component of the success of a protocol. This is no different when it comes to NFTs, and could be more reliant on constant liquidity in order to keep projects attractive to buyers through volume.

At the moment, it cannot be overstated that all the various protocols within the NFT space have done tremendously well at bringing forth mainstream adoption. However, there is still a missing piece that could significantly propel the demand of NFTs and NFT-backed financing and leveraging platforms. They are able to facilitate and drive demand for these assets, as financing and leveraging platforms for NFTs allow users to increase their purchasing power by being able to purchase other NFTs at, potentially, a fraction of the initial cost needed.

Project Overview

Introducing one of the pioneers of NFTfi, Pine Protocol! Pine is a two-sided, non-custodial protocol that facilitates NFT asset-backed lending. Pine Protocol users are able to leverage their “illiquid” NFTs, by putting them up as collateral to borrow Ethereum, and a variety of other currencies that are on the way. The platform essentially helps NFT holders immediately access needed liquidity without alternatively needing to sell their held NFT assets. With the ETH borrowers can, for example, draw up extra yield on other DeFi protocols. While lenders can receive their preferred, personally set APY on their held Ethereum, with the possibility of scoring a heavily discounted, sought-after NFT asset from their desired collection.

At the forefront of their protocol, Pine has owned the NFT lending landscape by building an intuitive and easy-to-use platform that addresses the learning curve issue faced by NFTfi and DeFi applications alike. The Pine protocol team is also made up of NFT enthusiasts who deeply understand the hesitation of trusting a third party with the custody of your assets. This is why Pine has built their infrastructure on a “non-custodial” basis, meaning that the protocol never “holds” your assets.

As an additional safety measure, Pine has designed their lending format with term loans, instead of continuous loans. For ease of understanding, what this means is that instead of the constant uncertainty that a continuous loan offers with regard to the duration of the loan, a term loan ensures that key details such as interest rates and duration are fixed, providing a straightforward user experience. Introducing a term loan structure ensures that borrowers are able to manage their positions with ease, as important factors such as repayment dates, total interest payable, are set and agreed upon during the inception of the loan. This allows users on Pine Protocol to have access to predictable cash flows, whilst limiting and minimizing the risk of protocol insolvency and market-to-market liquidations under normal circumstances.

In addition to implementing term loans, Pine Protocol enables every lender to set up their very own segregated lending pool, instead of following the norm with traditional users having to participate in co-mingled lending pools alongside multiple depositors. By creating an open, free environment, it provides lenders with the flexibility to choose which NFT collection assets they would like to receive as collateral, along with which terms they would like for the transaction, such as desired APY and desired loan duration.

For NFTfi borrowers alike, this platform could not be more satisfying! Borrowers can skip lengthy negotiations by simply going through a list of loan term options provided by the lenders, which are conveniently displayed on the app, select one that fits their risk profile, and instantly access liquidity, without having to trust the platform with holding their NFTs!

In conclusion, Pine Protocol creates a robust ecosystem because it ensures accurate risk assessments for lenders and borrowers through the clever, NFTfi unique use of segregated pools, thus ensuring that Pine Protocol does not fall into a scenario where forced selling is exhibited when a position defaults because the collateral is only mapped out to one lender. Further, this design guards against Pine Protocol facing a credit crisis scenario where debt repayment becomes a significant issue.

With those features and infrastructural design in mind, Pine Protocol is truly at the forefront of NFTfi innovation, with the ethos of protecting the NFT community through non-custodial smart contracts and an unrestrictive, intuitive platform.

Project Highlights

Partners and Investors include Sino Global Capital, AMBER, Spartan, Impossible Finance, Gate Ventures, Shima Capital and others

Quick Metrics

TTS Allocated to Impossible Launchpad: 0.67%
Public Sale Token Price: 1 PINE = 0.2 BUSD
Total Token Supply (TTS): 200,000,000 PINE

Investment Thesis

Pine Now Pay Later (PNPL)

The introduction of Pine Now Pay Later (PNPL) on Pine Protocol aims to introduce an innovation to NFTfi, which provides NFT buyers and traders with the ability and opportunity to receive an “NFT mortgage” in order to effectively facilitate NFT margin trading. This will allow users on Pine Protocol to acquire various NFTs with only a fraction of the initial cost needed.

With the rise in demand for NFTs in various sectors across crypto and even within mainstream conglomerates, the need for a protocol with the ability to facilitate margin trading across NFTs with ease is undeniable. This innovation will help create a positive flywheel in which both Pine Protocol is able to solidify itself in a nascent market within NFTs, whilst being able to provide higher purchasing power for users in order to boost both demand and volume within the NFT market as a whole.

With this in mind, Pine Protocol has built this tool as a “one-click transaction,” with the understanding of the complexity of DeFi and the potential further confusion brought about by the emerging NFTfi space. PNPL simply allows you to buy the NFT you want when you don’t have the ETH necessary. By using either OpenSea or SuperRare (more compatible marketplaces to come later), from your wallet you will be able to set the loan terms that you are comfortable with first and the purchase of the NFT is done simultaneously by using the funds from the loan you initiated in the same click.

In essence, the flow for PNPL will allow the transaction to be settled from the buyer’s wallet and loan from the protocol in a ratio set by the buyer itself, ensuring that risk appetite can be carefully determined in order to ensure the loan’s LTV requirements. The collateralized NFT always goes into the smart contract and is locked in a place that even Pine can never access, again reinstating the protocol’s commitment to trustless finance.

Coupled with the use of a term loan structure instead of a continuous loan structure, Pine Protocol is able to ensure that traders face less pressure from price changes and volatility, providing users a longer timeframe and runway before a margin call is triggered. This reduces the amount of uncertainty which the likes of other NFT loan products are not able to provide.

High synergies with other sectors of the crypto industry

With other sectors of crypto continuously integrating NFTs as a core component of their ecosystem, Pine Protocol is able to position themselves as a key player in the growing unification of NFTs and cryptocurrencies. Particularly in gaming, GameFi has been able to empower users that don’t have access to clear monetisation opportunities through earning mechanisms embedded in their games. However, GameFi NFTs can be expensive, and oftentimes the users that spend the most time in the game do not have the necessary spending power to acquire the NFTs to improve their rank in the game. As a result, having protocols like Pine will enable users to gain access to a variety of different games that initially would not have been available to them due to the excessive prices of competitive digital assets versus liquidity access.

On the other side of the spectrum, we have big players such as play-to-earn guilds, who hold large NFT inventories that are often underutilized. Pine is able to take advantage of this by being a means for play-to-earn guilds to increase their yield, through loaning out assets to users in need.

Pine Protocol is able to cater towards this need by aiming to extend its platform to allow projects such as BreederDAO, a specialist manufacturer of high-quality digital assets, to service their ecosystem of GameFi and Guild players.

However, a typical drawback within NFT loan protocols is that there are no universal standards in regards to ownership and utility around loan NFTs. Pine Protocol is able to solve this issue with their upcoming protocol feature that would allow borrowers to retain all utilities of their NFT even when it is being used as a collateral.

Competitive Landscape

Dashboard → https://dune.com/impossiblefinance/nft-lending-aggregated-dash

Future Roadmap

Pine Protocol is on the brink of launching their Pine v3 application. An array of new, intuitive features and improvements will be released to improve the user experience on Pine as a whole. To name a few that were previously highlighted in this article:

Pine Listings — “NFT Mortgages”
Auto-rollover loan options
NFT representation for the loan contracts
Pine Wallet — Retain NFT utility while in loan contract

The use of loan marketplace analytics will also be included in the upcoming version for users to conveniently view and manage their loan positions, ensuring optimized yield generation and risk management. Pine Protocol’s slated NFT wallet provides a solution to utility and ownership no other lending NFT protocol has been able to achieve and is one of the innovative features set to make waves in the NFTfi and NFT communities.

Team

Pine Protocol proudly is supported by a global network of contributors with a fervent passion for scaling the NFT industry, particularly the emerging ‘NFTfi’ space. With a potent collective of budding, Web3-native talents and seasoned, proven entrepreneurs, Pine’s team thrives in its diversity, has its finger on the pulse of industry trends and possesses veteran business sense to build and thrive new ventures. Each team member’s background is distinct and supports the growth of Pine’s ecosystem. From quantitative trading, DeFi smart contract development, metaverse building to traditional banking, the variety and quality of Pine Protocol’s core contributors is ultimately the driving force behind the project’s present and future success.

Alex, Head of Product

Alex is a blockchain-native smart-contract engineer, who started writing code at the age of 9 and mining cryptocurrencies at the age of 14. Alex has worked in the digital asset industry coding intensively for 4 years. With experience in programming for AMMs (Automatic Market Makers), fiat on-ramps, crypto exchanges, warm wallets (and multisig wallets) and forwarders in institutional environments like financial institutions and dynamic environments like startups. Along with being one of its founders, Alex, as Pine Protocol’s Head of Product, ensures product quality and supports constant innovation and improvements in protocol features, based on his technical know-how and suggestions from the Pine community.

Sharon, Head of Business

Sharon, Pine Protocol’s Head of Business, is an entrepreneur with over 5 years of experience in deal flow management. A former Wall Street credit and FX trader, Sharon spent a further 5 years of her career at State Street Bank, ICBC and the Hong Kong Monetary Authority. Her financial expertise lies in pricing and trading illiquid assets.

Amanda, Head of Growth

With more than 4 years of experience in Web3 marketing across DeFi, NFT and P2E gaming, Amanda has joined the Pine Protocol team as Head of Growth. Most recently, Amanda helped launch the NFT marketplace, Shoyu, and design its metaverse, as part of the core team at SushiSwap. With proven marketing success stories under her belt, Amanda’s role in Pine’s core team is to animate the protocol’s branding to build an engaged and ardent community.

Tgen, Head of Strategy

Tgen brings over 10 years of experience in technology, finance and entrepreneurship. After starting his career as a software developer, Tgen held various quantitative trading roles at global investment banks, hedge funds and cryptocurrency exchanges. He also co-found a FinTech startup that served over 1 million unique users. Tgen, an avid NFT collector himself, manages the business and product strategies at Pine.

Pine Token Metrics

Total Token Supply (TTS): 200,000,000 PINE
Launchpad Sale Hard Cap: US$268,000 (split into multiple pools)*
IDIA Standard pool: US$13,000 (5%)
vIDIA Standard pool: US$120,000 (45%)
vIDIA Unlimited pool: US$95,000 (35%)
Whitelist allocation: US$40,000 (15%)
Token Vesting: 100% distributed on day 1
Buy-back Protection Program: 75% downside protection from public sale price (details to be announced later)
Day 1 Circulating Market Cap: 1,400,000 (0.7%)
Listing Price: US$0.2

Tokenomics

Risk Evaluation

Pine Protocol’s main risk as a NFT lending protocol would be smart contract risks, due to the number of interactions needed between users and their individual pools. However, Pine Protocol has been able to mitigate this risk by introducing various audits performed by Quantstamp and Nassec. In addition to that, Pine Protocol has gone one step further by ensuring that investors helped perform in-house audits, ensuring that users and investors are actively using Pine Protocol without the fear of losing funds or assets. Once again, Pine Protocol is a non-custodial, trustless platform, which means that they never do nor will ever own your NFT assets.

About Pine Protocol

Pine protocol is a two-sided decentralized non-custodial protocol that facilitates NFT asset-backed loan transactions between lenders and borrowers. Pine Protocol is pioneering the NFTfi landscape with an NFT loan infrastructure that empowers NFT mortgages, margin trades and other credit-related transactions simply with the utilization of idle, “illiquid” NFT collectibles.

About Impossible Finance

Impossible Finance is a multi-chain incubator, launchpad, and swap platform led by Ex-Binance & DeFi veterans. It offers a robust product-first ecosystem that supports top-tier blockchain projects to targeted user audiences. With extensive support from key leaders in the crypto industry, Impossible Finance simplifies DeFi for users to enjoy fairer investing, cheaper trading and better yields.

Website | Whitepaper | Medium | Twitter | Telegram

Impossible Tokens

IDIA token is the core governance and access token for allocation into our launchpad IDO sales.

IF token is the core governance and fee accrual for the swap and other non-launchpad products within the Impossible family.

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Terms & Conditions:

Notes: DISCLAIMERS, TERMS, and RISKS
Risk Warning: Trading and/or generally investing in any cryptocurrency involve significant risks and can result in the complete loss of your capital. You should not invest more than you can afford to lose and you should ensure that you fully understand the risks involved. Before investing, please consider your level of experience, objectives, and risk tolerance, and seek independent financial and legal advice if necessary. It is your responsibility to ascertain whether you are permitted to use the services of Impossible Finance based on the legal and regulatory requirements of your country of residence and/or applicable jurisdiction(s)